Economic Survey 2017: Volume I, Chapter 4: Reconciling Fiscal Federalism and Accountability: Is there a Low Equilibrium Trap?

Arun Jaitley

Working Papers from eSocialSciences

Abstract: Long-run institutional development co-evolves with fiscal accountability involving, perhaps requiring, a low and declining dependence on devolved resources and a high and rising share of direct taxes in total taxes. India’s second and third tiers of government tend to under-perform relative to these standards. The extent of tax and functional devolution to these tiers is one possible explanation. However, one key finding is that these tiers under-collect direct taxes even relative to the powers that they have. Whether this could lead to a low equilibrium trap of weak direct tax collection leading to inadequate service delivery provision, back to weak collection and accountability, needs to be actively discussed

Keywords: Fiscal Federalism; Accountability; Equilibrium Trap; direct taxes; taxpayer; Fiscal decentralization; indirect taxes; revenue; local governments; agriculture; land reforms; panchayats; India (search for similar items in EconPapers)
Date: 2018-01
Note: Institutional Papers
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